If you’re planning a business in the USA, you need to do some paperwork and ensure compliance with your chosen sector’s licensing, permit, and registration rules. The same goes for cannabis businesses as well, with the only exception: cannabis is illegal at a federal level and has many legal nuances even in the states where it’s legal. So, this industry is heavily regulated; it means that you will need to understand all legal basics inside out to avoid trouble when opening and operating a weed farm, production lab, or online store.
Let’s walk step by step through the process of business licensing and regulations covering the weed business in the USA.
What Will I Learn?
The first point of consideration is official business registration that any business owner, whether cannabis or any other sector, should go through. You should form an LLC and file for its registration in the national register. Next, you should get the tax ID number for your business’s identification from the IRS. You need a general business license and a DBA filing before starting operations. You will need a sales tax permit if you plan to sell your products online or offline as a retailer. Finally, the industry-specific permit is required for specific business types, e.g., if they use land or deal with food.
Industrial Hemp Cultivation
Please keep in mind that licensing for hemp cultivation depends on the type of hemp you’re growing to grow. If your product contains less than 0.3% THC, it’s considered non-psychoactive hemp and doesn’t require any rigorous legal compliance. You can get a permit for such activities at the U.S. Department of Agriculture.
However, growing regular cannabis is subject to different regulations and requires multi-tier permits and licenses. For instance, you may get a micro-cultivation license for a grow space of up to 2,000 square feet, a standard license for an unlimited-sized grow space, and a nursery license for cannabis genetics work (e.g., clone and seed cultivation).
Though selling cannabis is a federal crime, states have distinct medical and recreational marijuana distribution regulations. So, you should learn what agency is responsible for dispensary licensing in your state and turn to that organization with a package of documents proving your eligibility.
- For instance, those who want to open dispensaries in Sacramento (California) will have to pay $1,000 for a license application and $4,000-$120,000 for the licensing fee depending on the gross annual revenue of their businesses.
- In Virginia, a non-refundable application fee of $10,00 and an initial permit fee of $60,000 are required from new cannabis businesses.
- Alaska authorities charge $1,000 for the application fee and renewal, $5,000 for the initial retail license, and $7,000 for its renewal.
- In Nevada, the application fee costs $5,000, with the initial retail license priced at $20,000 and its renewal costing $6,600.
- Oregon currently has the lowest entry barrier, with a $250 application fee and an annual retail license fee of $4,750.
Besides the licensing fee and compliance with the licensing regulations, you should check all relevant laws about dispensary location and service provision. In some cities, for instance, there is a cap on the number of dispensaries and a minimum distance of dispensaries from schools and each other. So, you should check all regulations and rent a space with proper regard to these nuances to avoid legal trouble or high fines.
Who to Turn to for a License?
The most problematic point about cannabis business consulting is that each state has specific laws, policies, and licensing requirements. Thus, you will need to do a lot of paperwork before clarifying everything. Here are a couple of examples:
- The Department of Taxation regulates the cannabis business in Nevada and issues licenses for new businesses.
- California has three licensing bodies for cannabis businesses: the Bureau of Cannabis Control, CalCannabis Cultivation Licensing, and the Manufactured Cannabis Safety Branch.
- In Colorado, you can apply for a medical or retail marijuana business license; different agencies regulate these two spheres of business activities.
A tip: in most states that legalized marijuana, this business’s licensing is done by the Department of Health. So, you should start your licensing inquiry from there and see where it leads you.
Licensing for CBD-Infused Product Manufacturing
Okay, you may not be a grower or seller. It’s also possible to be a manufacturer of CBD-infused products of different kinds, ranging from gummies to CBD tinctures and oils. So, what license do you need for operations?
In most states, it is the Department of Health’s licensing for CBD edible production. CBD-infused product labeling should comply with the FDA recommendations for packaged items. Besides, you should comply with the full set of food safety standards and local production rules. It’s a plus if you have a certified professional with cannabis-infused product manufacturing training.
A Cannabis Business Checklist
Now you might see that opening a cannabis enterprise might not be as simple as you initially thought. For instance, many states are highly restrictive for new cannabis businesses, and in others, people with a criminal track record cannot run a cannabis firm. So, instead of wasting the application fee in vain, double-check all rules in your state. We recommend checking your eligibility for this business type before you start real work on it, as you may lose money because of incompliance.